EMPLOYMENT AGREEMENT
This employment agreement ("Agreement") is made and entered into as of this
date
by and between In-House Rehab, Inc., a Kentucky corporation ("Corporation"),
and
Xxxxxx X. Xxxxxx ("Employee").
WHEREAS, Corporation and Employee desire that the term of this Agreement begin
on February 1, 1996 ("Effective Date").
WHEREAS, Corporation desires to employ Employee as Vice President & Chief
Financial Officer, and Employee is willing to accept such employment by
Corporation, on the terms and subject to the conditions set forth in this
Agreement.
NOW THEREFORE, IT IS AGREED AS FOLLOWS:
Section 1. Duties. During the term of this Agreement, Employee agrees to
be
employed by and to serve Corporation as Chief Financial Officer and Vice
President, and Corporation agrees to employ and retain Employee in such
capacities. Employee shall devote a substantial portion of his business time,
energy, and skill to the affairs of the Corporation as Employee shall report
to
the Corporation's President, and at all times during the term of this
Agreement
shall have powers and duties at least commensurate with his position as Vice
President and Chief Financial Officer, as such duties are outlined in Appendix
A hereto.
Section 2. Term of Employment.
2.1 Definitions. For the purposes of this Agreement the following terms
shall have the following meanings:
2.1.1 "Termination For Cause" shall mean termination by Corporation
of
Employee's employment by Corporation by reason of Employee's willful
dishonesty
towards, fraud upon, or deliberate injury or attempted injury to, Corporation
or
by reason of Employee's willful material breach of this Agreement which has
resulted in material injury to Corporation, or continuance of failure by the
Employee to perform his duties in compliance with this Agreement after written
notice to the Employee by the Board of Directors specifying such failure,
provided that such "cause" shall have been found by a majority vote of the
members of the Board of Directors of the Corporation other than Employee.
2.1.2 "Termination Other Than For Cause" shall mean termination by
Corporation of Employee's employment by Corporation (other than in a
Termination
for Cause) and shall include constructive termination of Employee's employment
by reason of material breach of this Agreement by Corporation, such
constructive
termination to be effective upon notice from Employee to Corporation of such
constructive termination.
2.1.3 Voluntary Termination" shall mean termination by Employee of
Employee's employment by Corporation other than (i) constrictive termination
as
described in subsection 2.1(b), (ii) "Termination Upon a Change in Control,"
and
(iii) termination by reason of Employee's death or disability as described in
Sections 2.5 and 2.6.
2.1.4 "Termination Upon a Change in Control" shall mean a
termination
by Employee of Employee's employment with Corporation within 120 days
following
a "Change in Control."
2.1.5 "Change in Control" shall mean (i) the time that Corporation
first determines that any person and all other persons who constitute a group
(within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934
("Exchange Act")) have acquired direct or indirect beneficial ownership
(within
the meaning of Rule 13d-3 under the Exchange Act) of twenty percent (20%) or
more of Corporation's outstanding securities, unless a majority of the "Con-
tinuing Directors" approves the acquisition not later than ten (10) business
days after Corporation makes that determination, or (ii) the first day on
which a majority of the members of the Corporation's Board of Directors are
not "Continuing Directors."
2.1.6 "Continuing Directors" shall mean, as of any date of
determina-
tion, any member of the Board of Directors of Corporation who (i) was a member
of that Board of Directors as of the date hereof, (ii) has been a member of
that
Board of Directors for the two years immediately preceding such date of
determination, or (iii) was nominated for election or elected to the Board of
Directors with the affirmative vote of the greater of a majority of the
Continuing Directors who were members of the Board at the time of such nomina-
tion or election or at least three Continuing Directors.
2.2 Initial Term. The term of employment of Employee by Corporation
shall
be for a period of three (3) years beginning with Effective Date ("Initial
Term"), unless terminated earlier pursuant to this Section. At any time prior
to the expiration of the Initial Term, Corporation and Employee may by mutual
written agreement extend Employee's employment under the terms of this
Agreement
for such additional periods as they may agree.
2.3 Termination For Cause. Termination For Cause may be effected by
Corporation at any time during the term of this Agreement and shall be
effected
by written notification to Employee. Upon Termination For Cause, Employee
shall
promptly be paid all accrued salary, bonus compensation to the extent earned,
vested deferred compensation (other than pension play or profit sharing plan
benefits which will be paid in accordance with the applicable plan), any bene-
fits under any plans of the Corporation in which Employee is a participant to
the full extent of Employee's rights under such plans, accrued vacation pay
and any appropriate business expenses incurred by Employee in connection with
his duties hereunder, all to the date of termination, but Employee shall not
be paid any other compensation or reimbursement of any kind, including with-
out limitation, severance compensation.
2.4 Termination Other Than For Cause. Notwithstanding anything else in
this Agreement, Corporation may effect a Termination Other Than For Cause at
any time upon giving written notice to Employee of such termination. Upon
any Termination Other Than For Cause, Employee shall promptly be paid all
accrued salary, bonus compensation to the extent earned, vested deferred
compensation (other than pension plan or profit sharing plan benefits which
will be paid in accordance with the applicable plan), any benefits under any
plans of the Corporation in which Employee is a participant to the full ex-
tent of Employee's rights under such plans (including accelerated vesting, if
any, of awards granted to Employee under the Corporation's stock option
plan), accrued vacation pay and any appropriate business expenses incurred by
Employee in connection with his duties hereunder, all to the date of termina-
tion, and all severance compensation provided in Section 4.2, but no other
compensation or reimbursement of any kind.
2.5 Termination by Reason of Disability. If, during the term of this
Agreement, Employee, in the reasonable judgment of the Board of Directors of
Corporation, has failed to perform his duties under this Agreement on account
of
illness or physical or mental incapacity, and such illness or incapacity
continues for a period of more than twelve (12) consecutive months,
Corporation
shall have the right to terminate Employee's employment hereunder by written
notification to Employee and payment to Employee of all accrued salary, bonus
compensation to the extent earned, vested deferred compensation (other than
pension plan or profit sharing plan benefits which will be paid in accordance
with the applicable plan), any benefits under any plans of the Corporation in
which Employee is a participant to the full extent of Employee's rights under
such plans, accrued vacation pay and any appropriate business expenses
incurred
by Employee in connection with his duties hereunder, all to the date of
termination, with the exception of medical and dental benefits which shall
continue through the expiration of this Agreement, but Employee shall not be
paid any other compensation or reimbursement of any kind, including without
limitation, severance compensation.
2.6 Death. In the event of Employee's death during the term of this
Agreement, Employee's employment shall be deemed to have terminated as of the
last day of the month during which his death occurs and Corporation shall
promptly pay to his estate or such beneficiaries as Employee may from time to
time designate all accrued salary, bonus compensation to the extent earned,
vested deferred compensation (other than pension plan or profit sharing plan
benefits which will be paid in accordance with the applicable plan), any
benefits under any plans of the Corporation in which Employee is a particip-
ant to the full extent of Employee's rights under such plans, accrued xxxx-
tion pay and any appropriate business expenses incurred by Employee in con-
nection with his duties hereunder, all to the date of termination. The Em-
ployee's estate shall not be paid any other compensation, including without
limitation, severance compensation.
2.7 Voluntary Termination. In the event of a Voluntary Termination,
Corporation shall promptly pay all accrued salary, bonus compensation to the
extent earned, vested deferred compensation (other than pension plan or profit
sharing plan benefits which will be paid in accordance with the applicable
plan), any benefits under any plans of the Corporation in which Employee is a
participant to the full extent of Employee's rights under such plans, accrued
vacation pay and any appropriate business expenses incurred by Employee in
connection with his duties hereunder, all to the date of termination, but no
other compensation or reimbursement of any kind, including without limitation,
severance compensation.
2.8 Termination Upon a Change in Control. In the event of a Termination
Upon a Change in Control, Employee shall immediately be paid all accrued
salary,
bonus compensation to the extent earned, vested deferred compensation (other
than pension plan or profit sharing plan benefits which will be paid in ac-
cordance with the applicable plan), any benefits under any plans of the Cor-
poration in which Employee is a participant to the full extent of Employee's
rights under such plans (including accelerated vesting, if any, of any awards
granted to Employee under Corporation's Stock Option Plan), accrued vacation
pay and any appropriate business expenses incurred by Employee in connection
with his duties hereunder, all to the date of termination, and all severance
compensation provided in Section 4.1, but no other compensation or reimburse-
ment of any kind.
2.9 Notice of Termination. Corporation may effect a termination of this
Agreement pursuant to the provisions of this Section upon giving thirty (30)
days' written notice to Employee of such termination. Employee may effect a
termination of this Agreement pursuant to the provisions of this Section upon
giving thirty (30) days' written notice to Corporation of such termination.
Section 3. Salary, Benefits and Bonus Compensation.
3.1 Base Salary. As payment for the services to be rendered by Employee
as
provided in Section 1 and subject to the terms and conditions of Section 2,
Corporation agrees to pay to Employee a "Base Salary" for the twelve (12)
calendar months beginning the Effective Date at the rate of $100,000.00 per
annum payable in twenty-six equal, bi-weekly installments of $3846.15. Em-
ployee's Base Salary shall be reviewed annually by the Compensation Commit-
tee of the Board of Directors ("Compensation Committee"), and the Base Salary
for each year (or portion thereof) beginning January 1, 1997 shall be deter-
mined by the Compensation Committee which shall authorize an increase in Em-
ployee's Base Salary for such year in an amount which, at a minimum, shall be
equal to the cumulative cost-of-living increment on the Base Salary as report
in the "Consumer Price Index, Seattle, Washington, All Items," published by
the U.S. Department of Labor (using January 1, 1996 as the base date for com-
putation).
3.2 Bonuses. Employee shall be eligible to receive a discretionary bonus for
each year (or portion thereof) during the term of this Agreement and any
extensions thereof, with the actual amount of any such bonus to be determined
in
the sole discretion of the Board of Directors based upon its evaluation of
Employee's performance during such year. All such bonuses shall be reviewed
annually by the Compensation Committee.
3.3 Additional Benefits. During the term of this Agreement, Employee
shall
be entitled to the following fringe benefits:
3.3.1 Employee Benefits. Employee shall be eligible to participate
in
such of Corporation's benefits and deferred compensation plans as are now
generally available or later made generally available to executive officers of
the Corporation, including, without limitation, Corporation's Stock Option
Plan,
profit sharing plans, annual physical examinations, dental and medical plans,
personal catastrophe and disability insurance, financial planning, retirement
plans and supplementary executive retirement plans, if any. For purposes of
establishing the length of service under any benefit plans or programs of
Corporation, Employee's employment with the Corporation will be deemed to have
commenced on September 30, 1994.
3.3.2 Vacation. Employee shall be entitled to two (2) weeks of
vacation during each year during the term of this Agreement and any extensions
thereof, prorated for partial years.
3.3.3 Life Insurance. For the term of this Agreement and any
extensions thereof, Corporation shall at its expense procure and keep in
effect
term life insurance on the life of Employee payable to the Estate of the
Employee the minimum aggregate amount of Five Hundred Thousand ($500,000.00)
dollars.
3.3.4 Automobile Allowance. For the term of this agreement and any
extensions thereof the corporation shall provide officer with an automobile.
The maximum cost to the Corporation will be $6,000.00 per year.
3.3.5 Reimbursement for Expenses. During the term of this
Agreement,
Corporation shall reimburse Employee for reasonable and properly documented
out-of-pocket business and/or entertainment expenses incurred by Employee in
connection with his duties under this Agreement.
Section 4. Severance Compensation.
4.1 Severance Compensation in the Event of a Termination Upon a Change in
Control. In the event Employee's employment is terminated in a Termination
Upon
a Change in Control, Employee shall be paid as severance compensation his Base
Salary (at the rate payable at the time of such termination), for the greater
of
the remaining portion of the Initial Term or twelve (12) months from the date
of
such termination provided, however, that if Employee is employed by a new
employer during such period, the severance compensation payable to Employee
during such period will be reduced by the amount of compensation that Employee
actually receives from the new employer. However, Employee is under no
obligation to mitigate the amount owed Employee pursuant to this Section by
seeking other employment or otherwise. Notwithstanding anything in this
Section
to the contrary, Employee may in Employee's sole discretion, by delivery of a
notice to Corporation within thirty (30) days following a Termination Upon a
Change in Control, elect to receive from Compensation a lump sum severance
payment by bank cashier's check equal to the present value of the flow of cash
payments that would otherwise be paid to Employee pursuant to this Section.
Employee shall also be entitled to an accelerated vesting of any awards
granted
to Employee under the Corporation's Stock Option Plan to the extent provided
in
the stock option agreement entered into at the time of grant. Employee shall
continue to accrue retirement benefits and shall continue to enjoy any
benefits
under any plans of the Corporation in which Employee is a participant to the
full extent of Employee's rights under such plans, including any perquisites
provided under this Agreement, though the remaining term of this Agreement;
provided, however, that the benefits under any such plans of the Corporation
in which Employee is a participant, including any such perquisites, shall
cease upon re-employment by a new employer.
4.1.1 Purchase of Shares Held by Employee and Insurance Coverage.
In
the event Employee's employment is terminated in a Termination Upon a Change
in
Control, the Corporation will also, be required to, at the sole option of the
Employee, redeem a minimum of fifty percent (50%) of the Corporation stock, or
any stock dividends thereof, owned by the Employee as of the Effective Date,
that are owned by the employee at the date of severance. The price to be
paid will be the market determined value at the close of business at the
date of severance. If a public market has not been created, or is not in
existence at the time of severance, then the price to be paid shall be the
most recent share price obtained in any private offering of the Corporation
shares of common stock. In the event Employee's employment is terminated in
a Termination Upon a Change in Control, the Corporation will also provide
family medical insurance consistent with coverages extended to other employ-
ees until the Employee reaches the age of sixty five (65). The requirement
that the Corporation purchase family medical insurance shall be excused
during any period of subsequent employment where the new employer provides
equal or better coverage.
4.2 Severance Compensation in the Event of a Termination Other Than for
Cause. In the event Employee's employment is terminated in a Termination
Other
Than for Cause, Employee shall be paid as severance compensation his Base
Salary
(at the rate payable at the time of such termination), for a period of the
greater of the remaining portion of the Initial Term or twelve (12) months
from
the date of such termination, on the dates specified in Section 3.1; provided,
however, that if Employee is employed by a new employer during such period,
the
severance compensation payable to Employee during such period will be reduced
by
the amount of compensation that Employee is receiving from the new employer,
officer is under no obligation to mitigate the amount owed to the officer
pursuant to this Section by seeking employment or other Employee shall be
entitled to an accelerated vesting of any awards granted to Employee under
Corporation's Stock Option Plan to the extent provided in the stock option
agreement entered into at the time of grant.
4.2.1 Purchase of Shares Held by Employee and Insurance Coverage. In
the event Employee's employment is terminated in a Termination Other Than for
Cause, the Corporation will also be required, at the sole option of the
Employ-
ee, to redeem a minimum of fifty percent (50%) of the Corporation stock, or
any stock dividends thereof, owned by the Employee as of the Effective Date,
that are owned by the employee at the date of severance. The price to be
paid will be the market determined value at the close of business at the
date of severance. If a public market has not been created, or is not in
existence at the time of severance, then the price to be paid shall be the
most recent share price obtained in any private offering of the Corporation
shares of common stock. In the event Employee's employment is terminated in
a Termination Other Than for Cause, the Corporation will also provide family
medical insurance consistent with coverages extended to other employees until
the Employee reaches the age of sixty five (65). The requirement that the
Corporation purchase family medical insurance shall be excused during any
period of subsequent employment where the new employer provides equal or
better coverage.
4.3 No Severance Compensation Upon Other Termination. In the event of a
Voluntary Termination, Termination For Cause, termination by reason of
Employee's
disability pursuant to Section 2.6, Employee or his estate shall not be paid
any
severance compensation.
Section 5. Outside Activities of Employee. Corporation acknowledges that
Employee has commitments and business activities not related to the
Corporation
and that certain of these commitments and business affairs involve activities
in
the long term care industry. There shall be no restriction on Employee's
ability
to fulfill such commitments or engage in such business activities, provided
that
during the term of Employee's employment under this Agreement or for a period
of
six months after the termination of such employment (other than a Termination
Other Than For Cause or a Termination Upon Change in Control) Employee shall
not
divert away from the Corporation, for officers personal benefit, or for the
benefit of an organization in which officer has a material financial interest,
any opportunity, arising during such period to pursue such opportunities
personally unless the Board of Directors of the corporation have determined
not
to pursue such opportunity.
Section 6. Payment Obligations. Corporation's obligation to pay Employee
the
compensation and to make the arrangements provided herein shall be
unconditional,
and Employee shall have no obligation whatsoever to mitigate damages
hereunder.
If litigation after a Change in Control shall be brought to enforce or
interpret
any provision contained herein, Corporation, to the extent permitted by
applicable law and the Corporations' Articles of Incorporation and Bylaws,
hereby
indemnifies Employee for Employee's reasonable attorneys' fees and
disbursements
incurred in such litigation.
Section 7. Confidentiality. Employee agrees that all confidential and
proprietary information relating to the business of Corporation shall be kept
and
treated as confidential both during and after the term of this Agreement,
except
as may be permitted in writing by Corporation's Board of Directors or as such
information is within the public domain or comes within the public domain
without
any breach of this Agreement.
Section 8. Withholdings. All compensation and benefits to Employee
hereunder
shall be reduced by all federal, state, local and other withholdings and
similar
taxes and payments required by applicable law.
Section 9. Indemnification. In addition to any rights to indemnification
to
which Employee is entitled to under the Corporation's Articles of
Incorporation
and Bylaws, Corporation shall indemnify Employee at all times during and after
the term of this Agreement to the maximum extent permitted under Washington
Business Corporation Act or any successor provision thereof and any other
applicable state law, and shall pay Employee's expenses in defending any civil
or criminal action, suit, or proceeding in advance of the final disposition of
such action, suit or proceeding, to the maximum extent permitted under such
applicable state laws.
Section 10. Notices. Any notices permitted or required under this Agreement
shall be deemed given upon the date of personal delivery or forty-eight (48)
hours after deposit in the United States mail, postage fully prepaid, return
receipt requested, addressed to the Corporation at:
0000 Xxxxxxxxxxxx Xxxxx
Xxxxxxxxxx, Xx. 00000
addressed to the Employee at:
00000 Xxxxxx Xxxxx Xxxxxx
Xxxxxxxxxx, Xx. 40245
or at any other address as any party may, from time to time, designate by
notice
given in compliance with this Section.
Section 11. Law Governing. This Agreement shall be governed by and
construed
in accordance with the laws of the Commonwealth of Kentucky.
Section 12. Titles and Captions. All section titles or captions contained
in
this Agreement are for convenience only and shall not be deemed part of the
context nor effect the interpretation of this Agreement.
Section 13. Entire Agreement. This Agreement contains the entire
understanding
between and among the parties and supersedes any prior understandings and
agreements among them respecting the subject matter of this Agreement.
Section 14. Agreement Binding. This Agreement shall be binding upon the
heirs,
executors, administrators, successors and assigns of the parties hereto.
Section 15. Attorney Fees. In the event an arbitration, suit or action is
brought by any party under this Agreement to enforce any of its terms, or in
any
appeal therefrom, it is agreed that the prevailing party shall be entitled to
reasonable attorneys fees to be fixed by the arbitrator, trial court, and/or
appellate court.
Section 16. Computation of Time. In computing any period of time pursuant
to
this Agreement, the day of the act, event or default from which the designated
period of time begins to run shall be included, unless it is a Saturday,
Sunday,
or a legal holiday, in which event the period shall begin to run on the next
day
which is not a Saturday, Sunday, or legal holiday, in which event the period
shall run until the end of the next day thereafter which is not a Saturday,
Sunday, or legal holiday.
Section 17. Pronouns and Plurals. All pronouns and any variations thereof
shall be deemed to refer to the masculine, feminine, neuter, singular, or
plural
as the identity of the person or persons may require.
Section 18. Arbitration. If at any time during the term of this Agreement
any
dispute, difference, or disagreement shall arise upon or in respect of the
Agreement, and the meaning and construction hereof, every such dispute,
difference, and disagreement shall be referred to a single arbiter agreed upon
by the parties, or if no single arbiter can be agreed upon, an arbiter or
arbiters shall be selected in accordance with the rules of the American
Arbitration Association and such dispute, difference, or disagreement shall be
settled by arbitration in accordance with the then prevailing commercial rules
of the American Arbitration Association, and judgment upon the award rendered
by
the arbiter may be entered in any court having jurisdiction thereof.
Section 19. Presumption. This Agreement or any section thereof shall not be
construed against any party due to the fact that said Agreement or any section
thereof was drafted by said party.
Section 20. Further Action. The parties hereto shall execute and deliver
all
documents, provide all information and take or forbear from all such action as
may be necessary or appropriate to achieve the purposes of the Agreement.
Section 21. Parties in Interest. Nothing herein shall be construed to be to
the benefit of any third party, nor is it intended that any provision shall be
for the benefit of any third party.
Section 22. Savings Clause. If any provision of this Agreement, or the
application of such provision to any person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to persons or circumstances other than those as to which it is held invalid,
shall not be affected thereby.
Section 23. Separate Counsel. The parties acknowledge that the Corporation
has
been represented in this transaction by the J. Xxxxx Xxxxxx Law Group, that
the
Employee has not been represented in this transaction by the Corporation's
attorneys, and the Employee has been advised that it is important for the
Employee to seek separate legal advise and representation in this matter.
Date: In-House Rehab, Inc.
a Kentucky Corporation
By:/s/ Xxxxx Xxxx
Xxxxx Xxxx, President
/s/ Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx, Individually
